Economy slump leads to baby bust as US births fall to 1920 level - Gate House

By Frank Bass BLOOMBERG NEWS

November 29. 2012 3:06PM

Economy slump leads to baby bust as US births fall to 1920 level

The U.S. birth rate last year fell to its lowest level since at least 1920, led by a decline in the number of babies born to immigrant women, who have been driving the growth in the nation’s population for two decades.

The country’s birth rate fell 8 percent from 2007 to 2010, according to a Pew Research Center report. The rate dropped 6 percent for U.S.-born women and plummeted 14 percent for foreign-born females since 2007, the onset of the worst economic downturn since the Great Depression. The decline continued last year to the lowest point since records began in 1920.

The study underscores the vulnerability of Medicare and Social Security, the two largest social-insurance programs for the elderly. Both are funded by payroll taxes on working-age adults, and both are expected to fuel the U.S. budget deficit as baby boomers retire and fewer workers replace them.

“When families are small, people rely more heavily on these programs,” said Ted Fishman, author of “Shock of Gray,” a 2010 book about the world’s aging population. “A low birth rate could be a recipe for mass poverty and isolation.”

The Pew study, based on data from the National Center for Health Statistics and the U.S. Census, found that the 14 percent decline in the birthrate for foreign-born women was greater than in the entire period between 1990 and 2007. The birthrate among Mexican women in the U.S., the nation’s largest immigrant group, fell 23 percent. The birth rate is defined as the number of births per 1,000 women ages 15-44.

Economic Distress

The report doesn’t try to explain why births among Hispanic and other immigrant women fell so much, although the study’s author said it’s linked to economic distress.

“Immigrants were particularly hard hit” by the recession, Gretchen Livingston, a senior researcher at Washington-based Pew who co-wrote the study, said in an interview. “Hispanics were hardest hit by a loss of wealth, loss of jobs and increase in poverty.”

The U.S. birth rate in 2011 was 63.2 per 1,000 women of childbearing age, according to preliminary numbers. That’s down by almost half from a peak of 122.7 in 1957 during the postwar baby boom. The rate steadily fell before stabilizing at 65-70 births per 1,000 since the 1970s.

White, non-Hispanic women made up two-thirds of U.S. births in 2010, a drop from 72 percent in 1990. Eleven percent of births among U.S.-born women were to teen mothers; about 5 percent of foreign-born mothers were teens.

Women older than 35 were responsible for 21 percent of births by immigrant mothers, and the older mothers made up 13 percent of births among U.S.-born women. Immigrants accounted for 33 percent of all births to women over 35, the study found.

Swelling Ranks

The ranks of Social Security recipients are swelling as baby boomers, those born between 1946 and 1964, begin to leave the workplace. About 10,000 baby boomers are turning 65 every day, according to a 2010 Pew study. Some 32.6 million U.S. households, or 28 percent, reported Social Security income in 2011, according to the Census Bureau’s American Community Survey.

The $773 billion program’s coffers have been depleted by a payroll tax cut in effect for the past two years. Social Security trustees estimated in their annual report released in April that the cut, which reduced the payroll tax to 4.2 percent from 6.2 percent, cost taxpayers about $112 billion this year. The tax break for 163 million workers is scheduled to expire at the end of the year.

The trust funds used to pay retirement, disability and survivor benefits “will be exhausted” in 2033, the program administrators said in their report.

Ominous Trend

The demographic trends aren’t promising, trustees said. In 1965, 81 million workers paid for benefits to 20 million people, a 4-to-1 ratio. The ratio has fallen to 2.8 workers per retiree and is expected to drop to two workers for every beneficiary by 2035, with 186 million workers paying for 91 million retirees.

Medicare, the nation’s health-insurance program for about 50 million elderly and disabled people, is in worse shape. The trust fund for that program is slated to run dry in 2024, its trustees said in an April report.

The size of the two programs makes them potential targets for any deficit-reduction agreement designed to avert the fiscal cliff, the more than $600 billion in tax increases and automatic spending cuts set to start in January.

In its 2010 draft report, the National Commission on Fiscal Responsibility and Reform, led by former U.S. Senator Alan Simpson, a Wyoming Republican, and former Clinton White House Chief of Staff Erskine Bowles, urged Congress to reform Social Security by raising retirement ages and Medicare by capping costs to make them sustainable.

‘Temporary Blip’?

Fertility rates affect both Social Security and Medicare funding, Charles Blahous, one of two public trustees for Social Security and Medicare, said in an e-mail, though he added “it is fairly typical for birth rates to drop during a recession.”

Even with a decline in the birth rate, Andrew Biggs, a resident scholar at the Washington-based American Enterprise Institute, said “a temporary blip wouldn’t be an enormous difficulty.

‘Big Deal’

“A more permanent decline in the birth rate, however, would be a very big deal for both Social Security and Medicare,” he said in an e-mail. “The beneficiary populations are rising; to the degree that populations of workers don’t keep pace, costs per workers will rise. We know that’s already taking place, but an even lower birth rate could cause serious problems.”

The increasing number of women who have become primary breadwinners for U.S. households has risen because of the recession, Fishman said, and has meant more women are deferring having children. Even so, he said, a healthy economy doesn’t guarantee high birth rates. In Japan, where 1 in 4 people will be 65 or older by 2015, birth rates began dropping when the economy began booming in the 1970s.

Livingston, the Pew study’s author, said the decline in fertility probably will slow as the economy rebounds, though rates won’t climb back to the historic highs of the middle 20th century.

“Are we going to return to those levels of fertility?” she said. “Um, no.”